Bunker adjustment factor (BAF), also known as fuel adjustment factor (FAF), bunker contribution (BUC), and bunker surcharge, reflects the fluctuations of ship fuel and is correlated with the price of Brent Oil price benchmark.
The carriers charge the BAF as a form of insurance against fuel price changes, as an increase in fuel costs results in an increase in BAF. It is varied according to trade lanes and added on top of the base rate which is normally updated per quarter.
The formula for BAF = fuel price x trade factor
The trade factor refers to the average fuel consumption that varies depending on the distance, weight of the load, fuel efficiency, transit duration, route, etc.